G.R. No.

232669

COCA-COLA FEMSA PHILIPPINES, Petitioner

vs.
RICARDO S. MACAPAGAL, ENER A. MANARANG, REMIGIO E. MERCADO, DANILO Z.
FABIAN, ALBERT P. TAN, EDUARDO N. ABULENCIA, JR., REYNALDO G. PINEDA, ERIC A.
ABAD SANTOS, WILFREDO C. DELA CRUZ, MANUEL T. CAPARAS, EDGARDO R. NAVARRO,
NESTOR L. RAYO, AND INOCENCIO M. ARAO, Respondents

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari  filed by petitioner Coca-Cola Femsa Philippines, Inc.
1

are the Decision  dated December 12, 2016 and the Resolution  dated June 30, 2017 of the Court of
2 3

Appeals in CA-G.R. SP No. 145345, which reversed the Decision  dated December 14, 2015 and the
4

Resolution  dated January 29, 2016 of the National Labor Relations Commission (NLRC) in NLRC
5

LAC No. 07-001679-14 upholding the validity of the redundancy program, as well as the resulting
dismissals from employment, and reinstated the Decision  dated February 28, 2014 of the Labor
6

Arbiter (LA) in NLRC Case No. RAB III-11-19515-12.

The Facts

The thirteen (13) respondents  were employed by petitioner Coca-Cola Femsa Philippines,
7

Inc.  (Company) at its manufacturing plant in San Fernando City, Pampanga, as part of the Product
8

Availability Group (PAG). In January 2011, the Company announced its plan to abolish PAG,
together with all of its warehouses and the positions under it, including those held by respondents,
and outsource its remaining functions to The Redsystem Company, Inc. (TRCI). Thereafter,
respondents received letters terminating their employment due to redundancy effective March 1,
2011. Thus, respondents filed a complaint for illegal dismissal, arguing that the redundancy
program was done in bad faith to undermine their security of tenure. They also alleged that TRCI is
not an independent contractor as it is a wholly-owned subsidiary of the Company. 9

For its part, the Company denied respondents' claims. It averred that it is engaged in the business of
manufacturing and selling carbonated drinks and other beverage items nationwide while PAG's work
involved coordination with the external distribution channels. To improve operation efficiency and
effectiveness, the Company resolved to outsource all of its distribution and coordination efforts under
PAG to an independent contractor, TRCI. Notices of the redundancy program were given to the
respondents on January 31, 2011 as well as to the DOLE at least thirty days prior to the effective
date of separation. The Company added that it also gave more than the required separation pay and
other benefits to respondents, who in turn voluntarily executed their respective notarized Deeds of
Receipt, Waiver, and Quitclaim.  Thus, the Company was surprised to learn that respondents filed
10

the illegal dismissal complaint almost two years after their separation.  It stressed that what was
11

declared redundant was its entire logistics operations nationwide, and in doing so, all positions
therein, without exception, were declared redundant. 12

The LA's Ruling

In a Decision  dated February 28, 2014, the LA found that the redundancy program was made in
13

bad faith and held that respondents were illegally dismissed. Accordingly, it ordered the Company to
reinstate respondents to their former positions without loss of seniority rights and other privileges,
with full backwages, and to pay wage and benefits differentials, as well as attorney's fees. 14
Dissatisfied, the Company filed an appeal  before the NLRC.
15

The NLRC's Ruling

In a Decision  dated December 14, 2015, the NLRC reversed the LA's ruling.  It held that the
16 17

redundancy program was done in good faith and was aimed at achieving a more cost-effective
operating framework. Thus, it upheld the Company's management decision to abolish the PAG, as
well as the validity of the resulting dismissals from employment. 18

Respondents moved for reconsideration  but the motion was denied in a Resolution  dated January
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29, 2016. Hence, they filed a petition for certiorari  before the Court of Appeals (CA).
21

The CA's Ruling

In a Decision  dated December 12, 2016, the CA reversed the NLRC's ruling and reinstated the
22

LA's Decision.  The CA explained that while the Company substantiated its need to streamline its
23

operations, it failed to provide fair and reasonable criteria in ascertaining which positions to abolish.
Thus, the Company failed to support its allegations of redundancy. Furthermore, the CA refused to
uphold the validity of respondents' quitclaims, noting that respondents and the Company did not
stand on the same footing. 24

The Company filed a motion for reconsideration,  which was, however, denied in a
25

Resolution  dated June 30, 2017; hence, this petition.

26

The Issue Before the Court

The issue before the Court is whether or not the CA correctly reversed the NLRC's ruling upholding
the validity of the redundancy program. 1âшphi1

The Court's Ruling

The petition is meritorious.

Preliminarily, the Court stresses the distinct approach in reviewing a CA's ruling in a labor case. In a
Rule 45 review, the Court examines the correctness of the CA decision in contrast with the review of
jurisdictional errors under Rule 65. Furthermore, Rule 45 limits the review to questions of law. In
ruling for legal correctness, the Court views the CA decision in the same context that the petition
for certiorari was presented to the CA. Hence, the Court has to examine the CA decision from the
prism of whether the CA correctly determined the presence or absence of grave abuse of discretion
in the NLRC decision. 27

In labor cases, grave abuse of discretion may be ascribed to the NLRC when its findings and
conclusions are not supported by substantial evidence.  Thus, if the NLRC's ruling has basis in the
28

evidence and the applicable law and jurisprudence, then no grave abuse of discretion exists and the
CA should so declare and, accordingly, dismiss the petition.  Otherwise stated, a Rule 45 petition
29

can prosper only if the CA failed to correctly determine whether the NLRC gravely abused its
discretion.
30

Viewed from these lenses, the Court finds that the NLRC Decision in this case was supported by
substantial evidence and is consistent with law and jurisprudence. Thus, the CA incorrectly found
grave abuse of discretion on the part of the NLRC. Accordingly, the NLRC Decision must be
reinstated. 31

Redundancy is an authorized cause for termination of employment under Article 298  (formerly,
32

Article 283) of the Labor Code. It exists when "the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise."  It can be due to "a number of
33

factors, such as the overhiring of workers, a decrease in the volume of business or the dropping of a
particular line or service previously manufactured or undertaken by the enterprise."  The
34

determination of whether the employees' services are no longer necessary or sustainable, and
therefore, properly terminable for redundancy, is an exercise of business judgment.  In making such
35

decision, however, management must not violate the law nor declare redundancy without sufficient
basis.  To ensure that the dismissal is not implemented arbitrarily, jurisprudence requires the
36

employer to prove, among others, its good faith in abolishing the redundant positions as well
as the existence of fair and reasonable criteria in the selection of employees who will be
dismissed from employment due to redundancy.  Such fair and reasonable criteria may include,
37

but are not limited to: (a) less preferred status, i.e., temporary employee; (b) efficiency; and (c)
seniority.38

In this case, the CA reversed the NLRC Decision on the ground that the Company failed to show
good faith in abolishing redundant positions.  The Court disagrees with the CA.
39

To establish good faith, the employer must provide substantial proof that the services of the
employees are in excess of what is required of the company.  In San Fernando Coca-Cola Rank-
40

and-File Union v. Coca-Cola Bottlers Philippines, Inc.  (San Fernando), wherein the same company
41

involved in this case terminated the employment of twenty seven employees due to the phasing out
of two selling and distribution systems, the Court held that the redundancy program was valid as it
was based on a careful study on how to simplify the multi-layered distribution system and make the
business operations more cost effective. Since the Market Execution Partners or dealership system
incurs the lowest cost-to-serve, the other distribution systems had to be phased out, resulting in the
termination of the employees, as what happened in this case. The Court ruled that the phasing out of
distribution systems was an exercise of management prerogative and there was no proof that it was
exercised in a malicious or arbitrary manner.42

Similarly, in this case, the Court finds that the termination of respondents was due to the
simplification of the distribution systems in the Company, considering that PAG's work primarily
involved coordination for the Company's finished products to reach the distribution channels for
delivery to the customers.  Since the Company's operating income still posted negative figures
43

despite improvement in sales volumes in 2007, management further reviewed the Company's
distribution channels to identify areas where cost may be reduced, as well as opportunities to
enhance operational efficiency. Based on this study, the Company resolved to abolish all positions
under PAG, including those which were previously held by respondents.  Since all PAG positions
44

were abolished, the CA erred in ruling that the Company still needed to choose who among the
employees should be dismissed, to which the fair and reasonable criteria requisite is pertinent.

Instructive is the case of Asian Alcohol Corporation v. NLRC  (Asian Alcohol), which presented two
45

types of redundancy. In the first scenario, the services of all the water pump tenders working in the
leased wells had to be terminated because the lease contract over the wells had expired. In the
second scenario, the employer found that one (1) of three (3) briquetting helper position was
redundant, and accordingly, chose which employee should be separated from service based on age
and the physical strength that comes with it. In the same way, the employer found it more cost
effective to maintain nine (9) instead often (10) mechanics in the machine shop, and thus, removed
the least efficient among them. In all these instances, the Court upheld the validity of the employees'
dismissal from service. 46

The first scenario in Asian Alcohol is similar to this case wherein all positions for a particular line of
service had been abolished. Needless to say, the services of all employees under the PAG had to
be terminated. Hence, the fair and reasonable criteria to determine which employees should be
dismissed from service, no longer finds application.

It bears stressing that respondents merely raised a "suspicion" without proffering any proof that only
union officers were not retained for redeployment. Certainly, as the Company has argued, the
abolition of its entire logistics operation affecting around two hundred (200) employees nationwide
cannot be construed as mere ruse to terminate thirteen (13) respondents.  The Company's good
47

faith is further shown by its act of giving separation packages more than what is required by law. 48

The Court in San Fernando, citing Asian Alcohol, likewise held that the implementation of the
redundancy program is not destroyed by the employer's act of availing the services of an
independent contractor to replace the services of the terminated employees,  as when the Company
49

availed of TRCI's services. All these considered, the Company has sufficiently shown that it was in
good faith when it terminated respondents' services on the ground of redundancy.

Furthermore, the Court finds that the quitclaims executed by respondents are valid. Case law
provides that not all quitclaims are per se invalid or against public policy;  they shall be recognized
50

as valid and binding undertakings where it is shown that the persons making the waiver did so
voluntarily, with full understanding of what they were doing, and the considerations therefor are
sufficient and reasonable,  as in this case. Notably, there was no showing that respondents were
51

forced or tricked into signing the release documents pursuant to the valid redundancy program. They
were likewise not forced to receive amounts less than what they were entitled to. The fact that
employers and employees do not stand on the same footing, as mentioned by the CA, should not
always militate against the employer. Indeed, the law steps in to annul quitclaims only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of the
settlement are unconscionable on its face,  but neither of these circumstances are present here.
52

All told, the NLRC did not gravely abuse its discretion in ruling that the redundancy program and
respondents' consequent dismissal were valid. Therefore, the CA erred in reversing the NLRC
Decision. Accordingly, it must be reinstated.

WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated December 12, 2016 and
the Resolution dated June 30, 2017 of the Court of Appeals in CA-G.R. SP No. 145345 are
hereby REVERSED and SET ASIDE for the reasons above-discussed. The Decision dated
December 14, 2015 and the Resolution dated January 29, 2016 of the National Labor Relations
Commission in NLRC LAC No. 07-001679-14 are REINSTATED.

SO ORDERED.

Carpio (Chairperson), Caguioa, J. Reyes, Jr., and Lazaro-Javier, JJ., concur.

Footnotes
1
 Rollo, Vol. I, pp. 35-92.

 Id. at 104-120. Penned by Associate Justice Ma. Luisa C. Quijano-Padilla with Associate
2

Justices Normandie B. Pizarro and Samuel H. Gaerlan, concurring.

3
 Id. at 122-125.

 Rollo, Vol. II, pp. 943-963. Penned by Commissioner Romeo L. Go with Presiding
4

Commissioner Gerardo C. Nograles and Commissioner Gina F. Cenit-Escoto, concurring.

5
 Id. at 1006-1007.

6
 Id. at 834-864. Penned by LA Leandro M. Jose.

 The names and positions of respondents are as follows: Ricardo S. Macapagal - plant
7

warehouse operation supervisor; Eduardo N. Abulencia, Jr. - transpo coordinator; Reynaldo

G. Pineda, Wilfredo C. Dela Cruz, and Eric A. Abad-Santos - auto-technicians; Edgardo R.
Navarro - plant buyer; Albert P. Tan, Ener A. Manarang, Danilo Z. Fabian, and Remigio E.
Mercado - forklift operators; Manuel T. Caparas and Nestor L. Rayo - sales logistic
coordinators; and Inocencio M. Arao - sales office assistant (rollo, Vol. I, pp. 105-106).

8
 Then known as "Coca-Cola Bottlers Philippines, Inc."; id. at 35.

9
 See id. at 105-108. See also rollo, Vol. II, pp. 834-846.

10
 See rollo, Vol. I, pp. 109-110.

11
 See rollo, Vol. II, p. 955.

12
 See rollo, Vol. II, pp. 637-639.

13
 Id. at 834-864.

14
 See id. at 857-863.

15
 See Memorandum of Appeal dated June 11, 2014; rollo, Vol. I, pp. 175-223.

16
 Rollo, Vol. II, pp. 943-963.

17
 Id. at 962.

18
 See id. at 959-962.

19
 See motion for reconsideration dated December 28, 2015; id. at 964-993.

20
 Id. at 1006-1007.

21
 Dated April 11, 2016. Rollo, Vol. III, pp. 1008-1077.

22
 Rollo, Vol. I, pp. 104-120.
  Id. at 119-120.
23

 See id. at 115-119.

24

 Dated January 4, 2017. Id. at 126-153.

25

 Id. at 122-125.
26

 University of Santo Tomas (UST) v. Samahang Manggagawa ng UST, G.R. No. 184262,
27

April 24, 2017, 824 SCRA 52, 60, citing Quebral v. Angbus Construction, Inc., 798 Phil. 179,
187 (2016).

 Quebral v. Angbus Construction, Inc., id. at 188.

28

 Id. See also Manggagawa ng Komunikasyon sa Pilipinas v. Philippine Long Distance

29

Telephone Co., Inc., G.R. Nos. 190389 & 190390, April 19, 2017, 823 SCRA 595, 613.

 Manggagawa ng Komunikasyon sa Pilipinas v. Philippine Long Distance Telephone Co.,

30

Inc., id. at 611.

 See Quebral v. Angbus Construction, Inc., supra note 27, at 188.

31

 As renumbered pursuant to Department Advisory No. 07, series of 2015, entitled
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"RENUMBERING OF THE LABOR CODE OF THE PHILIPPINES, AS AMENDED" dated

July 21, 2015. The provision reads: "Art. 298. Closure of Establishment and Reduction of
Personnel. -The employer may also terminate the employment of any employee due to the
installation of labor-saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking x x x." (Emphasis
supplied)

 Manggagawa ng Komunikasyon sa Filipinos v. Philippine Long Distance Telephone

33

Co., Inc., supra note 29, at 614, citing Wiltshire File Co., Inc. v. NLRC, 271 Phil. 694, 703
(1991).

 Philippine National Bank v. Dalmacio, G.R. Nos. 202308 & 202357, July 5, 2017, 830
34

SCRA 136, 143-144.

 See Coca-Cola Bottlers Philippines, Inc. v. Del Villar, 646 Phil. 587, 613 (2010).
35

 See Manggagawa ng Komunikasyon sa Pilipinas v. Philippine Long Distance Telephone

36

Co., Inc., supra note 29, at 614.

 See Arabit v. Jardine Pacific Finance, Inc., 733 Phil 41, 57-61 (2014).

37

 See id. at 58.

38

 See rollo, Vol. I, pp. 117-118 and 119.

39

 See General Milling Corp. v. Viajar, 702 Phil. 532, 543 (2013).

40
  G.R. No. 200499, October 4, 2017, 842 SCRA 1.
41

 The Court held thus: "[p]rior to the termination of the herein individual complainants,
42

respondent company has made a careful study of how to be more cost effective in
operations and competitive in the business recognizing in the process that its multi-layered
distribution system has to be simplified. Thus, it was determined that compared to other
distribution schemes, the company incurs the lowest cost-to-serve through Market Execution
Partners (ME[P]s) or Dealership system. The CRS and Mini- Bodega systems posted the
highest in terms of cost-to-serve. Thus, the phasing out of the CRS and MB is necessary
which, however, resulted in the termination of the complainants as their positions have
become redundant. Be that as it may, respondent company complied with granting them
benefits that is more than what the law prescribes. They were duly notified of their
termination from employment thirty days prior to actual termination." (Id. at 12-13.)

 See rollo, Vol. II, p. 952.

43

 See rollo, Vol. I, p. 110.

44

 364 Phil. 912 (1999).

45

 See id. at 924-934.

46

 See rollo, Vol. II, p. 637.

47

 See id. The separation package consisted of: 175% separation pay per year of service for
48

those who served less than 15 years; 200% separation pay per year of service for those who
served fifteen years and more; commutation of earned and unused leaves; proportionate
133th month pay; HMO coverage for five (5) years (until June 30, 2014) or until 65 years old,
whichever comes first; commission buy-out premium if applicable; and livelihood program
(see id. at 955).

 San Fernando Coca-Cola Rank-and-File Union v. Coca-Cola Bottlers Philippines,

49

Inc., supra note 41, at 13.

 Coats Manila Bay, Inc. v. Ortega, 598 Phil. 768, 779 (2009).
50

 Arlo Aluminum, Inc. v. Piñon, Jr., G.R. No. 215874, July 5, 2017, 830 SCRA 202, 214.
51

 See id.
52